I haven’t been writing much about the stock market in the past few weeks, because nothing important has happened. Right now people are focusing on the short-term dip in stocks that has been taking place, but that dip is likely to come to an end this month, probably in the next two weeks, as we see the start of the next round of earnings announcements when stocks “beat” purposely low analyst estimates. A rally or bounce will come, but it too will be in the context of what has been happening for months – an overall sideways market trend.
At the beginning of the year I said that I believed we were in a new cyclical bull market, as I cited the work of Walter Deemer. He showed how we saw a huge positive thrust in the internals of the market that always marked the stock of a new bull market. And it did. But, history also showed that this cyclical bull market would likely not lead to the type of year after year of gains as people experienced before 2020, but more likely a 2-3 year affair as was seen in the cyclical bull markets of the late 1960’s and 1970’s. Now – just like then – is defined by a time of inflation and back then the markets were in a secular bear market. Cyclical cycles are short-term 2-5 year cycles within a longer term 10+ year cycle.
So, I saw I thought we would see the markets do what they do in those shorter 2-3 year cycles and have most of their gains take place within a few months and then basically do NOTHING for 12+ months, before eventually beginning a new down cycle.
And that is what is happening.
The stock market is drifting right now.
The implication is that there is not much upside to most stocks here as an investment buy point. When you can get a guaranteed 5%+ in short-term Treasury bonds one is better off doing that then trying to buy stocks at this moment, until a better investment buy point comes.
So, I have little to say – and that means with little to say my audience for financial information has shrunk. Those most engaged in financial content want to hear about the fad of the moment. That was Metaverse two years ago and AI two months ago. People don’t think in terms of cycles, but instead memes – which serve as reasons to believe in fantastic stories told to justify buying what is going up the most in that moment and so the gurus deliver them to them. It’s why Cathie Wood became THE new guru of the LAST bull market.
With no picks and no trades there is nothing to feed people and an internet defined by social media demands hype to generate attention and video viewers. Energy stocks are now the top performing sector in the market and they historically lead in the last portion of a cyclical bull market.
We are also in a time when there is ZERO interest in gold and silver, although I believe we are likely to see the current dip in them end before the end of the year (likely ending around the time of one of the next two Fed meetings) to set up what should be a year of outperformance for the metals against the stock market next year, because we should be at the end of this current interest rate hiking cycle.
Anyway, I did an interview with Jim Goddard of www.howestreet.com talking about my views of the market this past week you can listen to here.
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-Mike
